M-Systems’ DiskOnKey Receives Its First Report Card Scoring High Marks for Its USB Flash Drive Functionality in a Learning Environment

SUNNYVALE, CA -- Jan. 12, 2005 -- How are high school students using the latest technology to get ahead in the classroom? From their perspective, up-to-date, practical technology is hard to come by, but USB flash drives present a productive solution enabling students to keep on top of their studies and stay organized. With the several hours a day that go into homework and those extensive research papers, a group of students at Whittier’s California High have realized the potential of M-Systems’ (Nasdaq: FLSH) DiskOnKey USB flash drive technology.

M-Systems launched this pilot program in the beginning of the 2004/2005 school year to demonstrate the value of technology and illustrate the usage of USB flash drives in an education setting. The program allows students to use technology and incorporate learning components with real world situations to prepare them for their future, including university and business environments. With a semester under their belt, both the senior class and Architectural and Engineering Academy students have found the device to be an efficient, compatible and easy way to store their research, ongoing projects as well as other related data. They have also found that using DiskOnKey has decreased the number of additional storage devices and eliminated any reliability issues found in older technologies such as floppies, Zip drives and CDs.

“I found myself getting more work done because all computers have USB ports as opposed to a Zip drive, which we used in previous years,” said Brian Chowsangrat, senior class student at California High School, Whittier Union High School District. “DiskOnKey allows me to transfer the work I started at school to my home computer easily and quickly, making my life much easier.”

In addition, students are finding the device to be an ideal solution to stay organized by giving them one location to digitally store all of their schoolwork versus the multitude of storage media they have used in the past. “Being so compact, I can keep all of my documents in one place and because of the durability of the device I don’t have to worry about it getting ruined,” said Tim Luna, senior class student at California High School, Whittier Union High School District. “The device keeps a space open for my school work -- it’s like having a key just for education purposes, so I can be more efficient with my studies.”

Teachers have also found their students’ organizational skills increasing and realize the necessity of the devices in the classroom. However, recent budget cuts do not allow for schools to be equipped with the latest and greatest technology offered. This program gives the students the opportunity to work with technology that is used in the business world everyday and illustrates the benefits of newer technology in the classroom.

“The DiskOnKey Education Program gives students the opportunity to learn easily and avail themselves to something they might not have previously been familiar with,” said Pat Hodges, teacher and senior project coordinator, California High School, Whittier Union High School district. “In addition, teachers are able to enhance their education process and assign projects they were not able to in the past. To this point, we have been very happy with the value the students are getting.”

While there is no doubt that students are very receptive to technology and understand the need for it, by using one of today’s fastest growing consumer electronic devices, this particular group of students is learning how to stay one step ahead of the pack after graduation.

“The goal of this project was to create awareness of USB flash drive capabilities and to assist educators with bringing technology to tomorrow’s leaders, today,” said Blaine Phelps, worldwide marketing manager for M-Systems’ DiskOnKey. “The project has demonstrated that the students truly understand the uses and opportunity these devices bring to their learning environment, and we are excited that we were able to make this project come to fruition.”

At the end of the school year, M-Systems and California High School will evaluate this program and its overall impact to the education experience with the hope that this case study will resonate with other budget focused school districts.

About The DiskOnKey Education Program

M-Systems’ DiskOnKey developed a pilot program with California High School in Whittier, Calif. to provide its teachers and students with several hundreds of DiskOnKey devices to both its senior class and students in the Architectural and Engineering Academy. This program was created in an effort to provide the school with the latest in technology and act as a learning enabler. In addition, through this program, M-Systems intends on gaining an understanding of how technology can be used in a learning environment to create a better education product in the long run. This pilot program will last throughout the 2004 to 2005 school year, while charting the progress along the way.

About M-Systems’ DiskOnKey

The DiskOnKey is a unique, patented solution offering partners the unprecedented flexibility and ease-of-use to implement M-Systems’ expertise into their existing product line or to design their own form factor using the Company’s internal architecture. The award-winning DiskOnKey product line offers consumers trusted quality, reliability, extreme security and the industry’s leading product warranty.

For product information, enhancements, upgrades and general information on the USB flash drive category please visit www.diskonkey.com.

About M-Systems

M-Systems designs, develops and markets innovative flash data storage solutions for digital consumer electronics markets. M-Systems primarily targets two fast-growing digital consumer electronics markets: the USB (universal serial bus) flash drive market with its DiskOnKey(R) product and the multimedia mobile handset market with its Mobile DiskOnChip(R) products. For more information, please contact M-Systems at www.m-systems.com.

All company and product names mentioned may be trademarks or registered trademarks of their respective holders and are used for identification purposes only.

NOTE: This press release includes forward-looking statements as defined in the private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties which may cause actual results to vary significantly. These risks include, but are not limited to, risks related to: the effect of global economic conditions in general and conditions in the Company’s industry and target markets in particular, shifts in supply and demand, market acceptance, the impact of competitive products and pricing, product development, commercialization and technological difficulties, and capacity and supply constraints including dependence on flash component suppliers; changes in the Company’s and its customers’ inventory levels and in inventory valuations; timely product and technology development/upgrades and the ability to manage changes in market conditions as needed; market acceptance of new products and continuing product demand; the impact of competitive products and pricing on the Company’s and its customers’ products and markets; development, release and sales of new products by strategic suppliers and customers; development and growth of anticipated markets for the Company’s and its customers’ products; and other risk factors detailed in the Company’s most recent annual report and/or in any of its other filings with the Securities and Exchange Commission. All forward-looking statements included in this release are based upon information available to the company as of the date hereof. The Company assumes no obligation to update the Information in this release and disclaims any obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Reference to the Company’s website above does not constitute incorporation of any of the information thereon into this press release.

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Kristine Hernandez

Editorial Contact for M-Systems

O’Leary and Partners Public Relations

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